Taxable point of crypto assets received as income

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Hey, 
My partner (UK resident) has been offered a role within a US company in which his salary is paid in cryptoassets. The work is to be carried out within the UK and he would continue to remain a UK citizen.

At what point is the asset received taxable for income tax purposes. I originally thought that it is that date the asset is received but I have seen conflicting information that income tax is payable once the asset has been exhanged into fiat. 
 

I've looked into whether the tokens received are RCAs however the Company does not have a UK base and therefore not due to withhold PAYE and NI on my parters behalf.

I'm pretty new to the tax rules on crypto so I'm  trying to brush up on knowledge.

Thanks! 

Replies (18)

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By David Ex
11th Mar 2022 10:44

Are you also taking US tax advice?

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Replying to David Ex:
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By Shaunaodwyer
11th Mar 2022 11:01

Hi David
The work is to be carried out within the UK and my partner is to remain a UK resident for the foreseeable. I thought that the income would be subject to UK tax rules , would you suggest seeking US tax advice?

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Replying to Shaunaodwyer:
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By Tax Dragon
11th Mar 2022 11:16

Anyone that starts a thread with "hey" needs to take US advice.

But your partner's employer sounds like they could do with taking UK advice. There's not just tax to consider - there's NLW and a whole raft of other stuff. I guess what your partner's employer does is outside of your control though?

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Replying to Tax Dragon:
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By Shaunaodwyer
11th Mar 2022 11:43

Noted, thank you!

My partner is being paid above the NLW, but you are correct in saying that I have no control over my partners employer. Just want to make sure everything is above board before he puts pen to paper.

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Replying to Shaunaodwyer:
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By Tax Dragon
12th Mar 2022 02:01

So paid only partly in cryptoassets? To be fair, that doesn't change your question about when it counts for tax, but it's quite misleading to say the salary is paid that way when it's some and some.

Sorry... natural born pedant, me.

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By JustAnotherUser
11th Mar 2022 13:04

I would lean to be also advise speaking to an actual accountant that the sterling equivalent at the date of receipt is taxable in the same way as employment/self employment income.

However:

What is the crypto?
Where is it being stored, what country or exchange?
Does he own the keys to this crypto or stored elsewhere?
Is the salary a set amount (eg 10,000 crypto a month) or a set value (eg $10,000 of crypto at current price), what is the current price if it does a +/= 50% several times over a given month?

Welcome to the world of crypto.

also

https://www.gov.uk/guidance/check-if-you-need-to-pay-tax-when-you-receiv...

also, most likely correct. If he receives $10,000 of X he will most likely have income tax on that, plus any profit on gains will be taxed at point of sale.

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By ireallyshouldknowthisbut
11th Mar 2022 13:22

Given it sounds like employment, the whole thing should be through PAYE in the first place. If its not, it doesn't sound like a very reputable business. Are you sure you are not being paid in fairy dust and promises?

However if this is self employment (eyebrows raised) then the tax point will be when paid in crypto, valued at spot rate at the time.

Any gains/losses before it hits 'real money' (or used say to pay for things) would probably be a capital gain/loss but might not be as the rules are horrific.

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Replying to ireallyshouldknowthisbut:
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By JustAnotherUser
11th Mar 2022 13:33

ireallyshouldknowthisbut wrote:

doesn't sound like a very reputable business

This is becoming common in web3 / crypto. Cash strapped Startups are attracting top talent with big prizes (never guaranteed) .
If this chap is in early it can be a coin toss between his crypto going from 30k to 10m overnight vs the market shifting and the company failing slowly.

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Replying to JustAnotherUser:
By ireallyshouldknowthisbut
11th Mar 2022 14:18

its being going on for year. I remember in the late 90's being offering a tiny salary and shares in an internet start-up. It was an innovative search engine.

I asked about their burn rate in the interview, and they sheepishly mumbled they had funds for at least 6 months. Never heard about them again so I assume they went bust.

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Replying to ireallyshouldknowthisbut:
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By Hugo Fair
11th Mar 2022 14:47

Or got bought by Alphabet?

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Replying to ireallyshouldknowthisbut:
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By DJKL
14th Mar 2022 10:48

My son was the same only 5-6 years ago regarding a new platform involving a well known name in software development, an okay salary offered but also equity which would, if the platform had blossomed, have made him reasonably wealthy- he declined and the project on offer has barely seen the light of day so sound judgement shown by him in hindsight.

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Replying to ireallyshouldknowthisbut:
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By Homeworker
16th Mar 2022 11:27

[quote=ireallyshouldknowthisbut]

"Given it sounds like employment, the whole thing should be through PAYE in the first place. If its not, it doesn't sound like a very reputable business. Are you sure you are not being paid in fairy dust and promises?"

A foreign employer cannot be required to operate a PAYE scheme. It used to be, and I believe still is, the case that in this situation the employee had to operate PAYE on himself, using a "direct collection or direct payment" scheme. See https://www.gov.uk/guidance/when-and-how-an-employee-operates-paye-on-th...

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By Duggimon
14th Mar 2022 10:34

This is really the worst of both worlds, your partner will be taxed on the value of the cryptoassets at the time they're transferred as income, then be unable to relieve the capital losses made on the devalued cryptoassets this business is creating to pay their staff with. At least I presume it's their own cryptoassets, if they're buying other ones then paying their staff with them then they'd be as well paying wages with money and save on the fees and overheads.

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Replying to Duggimon:
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By delriene72021
16th Mar 2022 12:28

Lots of comments here and I'm not sure of the level of personal involvement in crypto. It would be wise for all accountants to get a basic understanding of this space, as I believe we will see more employers paying staff in crypto. If we understand why individuals get involved in crypto in the first place and the type of activities involved then we will be better placed to offer guidance.
Not all crypto assets are equal and not all crypto assets will lose all it's value. For example Bitcoin has gone from around $500 in 2013 to around $40,000 today. Over the last ten years it has risen in value on average by around 150%. So we can probably see the attraction. History is usually a good indication of what may happen in the future. Education is paramount.
Payment in crypto is treated in the same way as any other non cash asset. As long as the asset ownership actually passes from the employer to the employee, PAYE should be calculated on the value of the asset in the native currency (in the case £ sterling) at the time of transfer.
Should the individual subsequently sell the asset and be subject to CGT, credit is available for any PAYE income tax suffered. HMRC do provide guidance on this.
Just sharing my thoughts and hope this helps.

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Replying to delriene72021:
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By Tax Dragon
17th Mar 2022 09:26

delriene72021 wrote:

Payment in crypto is treated in the same way as any other non cash asset.

Non cash. The reason I mentioned NMW/NLW up top. Also, by the way, why focus on the crypto aspect misses the point of the question. (Ironically, the OP was the first of several to do that.)

But not necessarily like any other non cash asset. OP mentioned RCAs. I believe that is a relevant point. PAYE72040 deals with payment in RCAs.

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By David Gordon FCCA
17th Mar 2022 12:16

1)
It does not matter if he is paid in Cowrie shells or walnuts.
2)
I have client who is UK sales manager for a major international US company.
He holds UK passport, and is resident and domiciled in the UK.
He is chargeable to UK tax on his world income, per regular UK tax rules
Further the US company was obliged to set up a UK PAYE scheme for its half-dozen similar persons in the UK. (Working from home) even though it has no offices or establishment of any kind in the UK, but sells its products to UK based companies.
Remuneration is deemed paid on the earliest of receipt of non-refundable money, barter goods, benefit-in-kind, or contractual payment date.
e:g: see also CGT, VAT, and CIS subcontractors.
I believe that HMRC will expect the £UK exchange value of: Benefit in kind or cash, at contractual payment date to be the salary. I assume he has a contract of employment, even if issued under USA rules, to be the sum chargeable as "Gross Pay"
NB
He also may be liable to national insurance, and so, be penalised at his retirement date for missing contributions.
There are, we know, many weird wonderful schemes for avoiding tax on "Salary". Most of them should carry a health warning.

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Replying to David Gordon FCCA:
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By Tax Dragon
17th Mar 2022 14:33

David Gordon FCCA wrote:

1)
It does not matter if he is paid in Cowrie shells or walnuts.

As already noted, it may matter whether the pay is in the form of RCAs. (There wouldn't be much need for s696 if PAYE applied in any event. And the NIC treatment may also depend on this point.)

But in terms of the point at which the 'pay' is taxable (the question in the OP)... I agree, it doesn't matter. It appears that all respondents are agreed on that.

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